Urban local bodies: Property taxes using PPP jumped 5 times in 2 years

Urban local bodies: Property taxes using PPP jumped 5 times in 2 years

Though most urban local bodies (ULBs) have a huge shortage of key infrastructure, the general excuse is that not enough state governments have transferred enough powers to them to be able to collect their own revenues.

While that is certainly an issue, equally problematic is that even where these powers have been given, ULBs are not able to make the most of them.

Though most urban local bodies (ULBs) have a huge shortage of key infrastructure, the general excuse is that not enough state governments have transferred enough powers to them to be able to collect their own revenues. While that is certainly an issue, equally problematic is that even where these powers have been given, ULBs are not able to make the most of them. As a result, according to the latest update by Janaagraha Centre for Citizenship & Democracy, it is only in three states in the country—Punjab, Goa and Andhra Pradesh—that ULBs are able to collect more than half their revenues through their own efforts. In Uttar Pradesh, the share is just 25%, it is 32% in Rajasthan, a mere 16% in the prosperous Chandigarh and an even smaller 5% in the case of Manipur. Worse, there is real pampering of state capitals to the detriment of all other cities. So, in Gujarat, ULBs in the capital spent, on average, `7,503 per capita population in 2012-15 as compared to `3,023 in the rest of the state; it was `26,657 and `8,113 in the case of Maharashtra.

A very big problem here is the inability of ULBs to raise taxes. In the case of Bengaluru and Jaipur, Janaagraha had estimated—for the Economic Survey – that the cities collected just around 5-15% of the total property taxes that they could if they did this well, using satellite imagery to map the property and use the FSIs for each area. In the case of Bengaluru, Janaagraha estimated the city could collect as much as `4,360-8,694 crore as tax from property, or a mid-point of Rs 6,526 crore—as against this, the actual collection was just 16%, or `1,032 crore. In the case of Jaipur, the collection was under 6% of what could have been achieved. The good news here is that, to boost tax collections, Ranchi chose three private agencies to do this and, as a result, from `6.1 crore in FY15, property tax collections rose nearly five times to `28.9 crore in FY17. In other words, if ULBs complain of a funds shortage, a large part of that is their own doing—at a macro level, the 13th Finance Commission had estimated these bodies could raise their current collections of Rs 4,400 crore to Rs 22,000 crore at even an 80-85% collection efficiency. There are other concerns that Janaagraha found—there are very large delays in preparation of accounts (nine years for 38 local bodies in Uttar Pradesh) and many unanswered audit queries (the queries accounted for expenditure of `5,854 crore in Rajasthan, with some pending since 2003-04). While lack of accountability is a big issue, if these bodies could raise taxes in the manner Ranchi has, they could hire more people to keep proper accounts as well.